One bitcoin has 100 million sats, short for satoshi. One Argentinian Peso (ARS) has like all fiat money 100 cents. One ARS cent is now worth a bit less than 1 sat.
Above is the official rate of Argentinian money, and we can see its plunge over very few years in a most tragic destruction of this very beautiful country.
Even in this official rate, which is not accessible to ordinary Argentinians, bitcoin sats are fairly close to reaching parity.
The unofficial rate, according to a site called Blue Dollar which tracks it, is 50 pesos higher than the official one.
As far as Argentinians are concerned therefore, one bitcoin sat is now worth 1.2 cents of their money.
That also means bitcoin has to rise 100x to reach sats parity with dollar cents, or the dollar has to fall by 100x which is inevitable.
In Argentina however bitcoin is already worth 1.2 million pesos in the unofficial market, and 700,000 pesos even at their own central bank, with one bitcoin being 100 million sats.
This complete destruction of the economy is an effect of the banking system which claims independence. Here is how it works:
The base interest rate in Argentina to borrow money was as much as 80% a couple of months ago, now at 40%.
That means if you borrow let’s say 1,000, and do manage to pay it back in full with interest, 1,800, the 1,000 is destroyed, while the 800 becomes new money.
The rate of money printing therefore is extreme, and because so much money is flooding the market in such a short time, inflation is galloping.
The relationship between interest rates and inflation is self evident from these two charts, but we don’t see why, what is linking them.
That’s because government bond data is not easy to come by in a nice chart form as the two above, but that the Argentinian government is deep in debt is no secret.
They thus need to borrow a lot to pay back the debt, but the central bank is offering them loans at usury levels interest rates.
How? Not directly. The commercial banks ‘buy’ the bonds in full and then sell them to the market or indeed to the central bank.
This way the central bank is effectively loaning the government money by effectively printing the bonds – but through commercial banks which can claim private, independence, etc – which they then destroy once the principal is payed off, but because the interest rate here is so high, almost as much as the principal itself becomes actual full on money, albeit profits for the banks.
Because that’s what interest rates are, new money once they are payed back with the full principal. If the principal is not paid back, then it becomes a debt for the bank which now has to pay it itself to destroy the principal.
Meaning the system generally works and fairly ok, but without any democratic accountability or constraint. Creating two potential problems.
One such problem is what Europe in particular is seeing. Banks are simply not lending money. That means the money supply in Europe is contracting in the market even as the central bank prints like no tomorrow to fund government debt.
A dichotomy that creates the peculiar situation of stock prices up and up, while the real economy has pockets of significant poverty in Europe itself and America.
The other problem is shown by Argentina. Banks are lending too much and at a very high interest rate. So they’re printing money like no tomorrow both for the market and for the government.
Banks are lending so much there because interest rates are so high, and they’re not lending anywhere near enough in Europe because interest rates are so low, which effectively translates to high profits for the banks or low to no profits.
The problem is that neither in Argentina nor in Europe can anyone tell the banks to lend more or less, and we don’t mean by writing an angry letter.
There is no effective oversight over the fundamental matter of money, therefore banks are doing what profits them most without consideration of its economic and social effects.
As Argentina has no choice but to borrow more to pay its debt, the bank can ask usury level interest rates because no competition.
In Europe the government would have to nationalize banks if it wanted to force them to lend more, and that’s a political battle none of them wants to take on especially as for a decade now they’ve been in the long past bubble of scrupulous banks lending too much, forgetting time moves and so too should their thinking.
In short, while banks do have to take much of the blame and perhaps most of it for not engaging enough in public consultation or consideration, the political class has to take quite a bit of the blame as well for lacking either will or knowledge in regards to a better steering of the currency, and thus the economy.